The phase-out of imports of SHC proposed by the EAC to promote its domestic garment sector will impact East African economies in various ways. The phase-out is based on the assumption that domestically produced clothing competes directly with used clothing, and that the imports of used goods have contributed to the decline of the domestic garment industry. However, a review of the existing literature has shown that there are several reasons for the decline of the African garment sector. These include the liberalisation undertaken in the 1980s and 1990s, which prompted a process of de-industrialisation and
was accompanied by growing impoverishment of many African citizens, which encouraged the import of SHC. Another reason is the increased presence of competitive Asian countries in garment value chains, and the subsequent availability of cheap new imported clothing.
This study has produced the first estimate of imports of SHC in Tanzania. It assessed the number of imported SHC by type, and then compared this with the levels of domestic production and imports of new clothing to estimate the magnitude of domestic consumption.
This analysis has shown that imports of both new and used clothing dwarf domestic production. This indicates that there is enough room for the Tanzanian garment sector to grow.
The effects of the phase-out in the short term will depend on whether Tanzanian consumers consider new clothing to be a good substitute for used clothing, and on the price elasticity of their demand. We have identified the potential loss of employment for those involved in the SHC value chain, which might be partially offset by the creation of new employment in the garment sector, as a potentially adverse effect of the phase-out. We have also identified a potential increase in imports of new clothing, which may weigh on Tanzania’s trade balance.
In the long term, the effects of the phase-out will depend on whether it prompts new investment. The challenges faced by current (and prospective) investors persist, and if these are not addressed, it is unlikely that the phase-out will generate enough new investment to replace the imports of new and used clothing. Instead, it might simply enable garment producers to appropriate the rent created by the phase-out, at the expense of Tanzanian consumers.
The available literature shows no evidence that similar phase-outs and bans have worked elsewhere (and in fact our work identifies this as a major gap in the existing research).
Instead, we suggest that for these measures to actually prompt increased investment in manufacturing, they need to have a clear timeline and a performance-based system, and must be effectively enforced. All of these preconditions are absent in the East African case.
Acknowledgements
The authors are very grateful to Pietra Rivoli, Georgetown University for the excellent input and advice provided on an earlier draft. We also wish to acknowledge the contribution of the interviewees who allocated their time to answer our questions and provided useful information and insights on the sectors under analysis.
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